Correlation Between Diodes Incorporated and InTest

Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated and InTest at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Diodes Incorporated and InTest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diodes Incorporated and inTest, you can compare the effects of market volatilities on Diodes Incorporated and InTest and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Diodes Incorporated with a short position of InTest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and InTest.

Diversification Opportunities for Diodes Incorporated and InTest

0.18

Correlation Coefficient

Diodes Incorporated  InTest

Average diversification

The 3 months correlation between Diodes and InTest is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and inTest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on inTest and Diodes Incorporated is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Diodes Incorporated are associated (or correlated) with InTest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of inTest has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and InTest go up and down completely randomly.

Pair Corralation between Diodes Incorporated and InTest

Given the investment horizon of 90 days Diodes Incorporated is expected to generate 0.77 times more return on investment than InTest. However, Diodes Incorporated is 1.31 times less risky than InTest. It trades about -0.03 of its potential returns per unit of risk. inTest is currently generating about -0.06 per unit of risk. If you would invest  9,249  in Diodes Incorporated on October 22, 2024 and sell it today you would lose (3,158) from holding Diodes Incorporated or give up 34.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Diodes Incorporated  vs.  inTest

Diodes Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

inTest

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in inTest are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, InTest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diodes Incorporated and InTest

The main advantage of trading using opposite Diodes Incorporated and InTest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated position performs unexpectedly, InTest can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in InTest will offset losses from the drop in InTest's long position.

The idea behind Diodes Incorporated and inTest pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.